to get rid of the large magazines. because there is no place in america anymore that is safe. this could happen any time, anyplace and so with that i thank you for listening to me tonight and i thank my friend for standing here with me and talking about it. i will say in closing, it's 17 years since an incident happened to my family, there does not a day go by that i don't remember what happened and that's why i continue to fight for this issue. i don't want another family to go through the pain. i don't want to see another person die. i don't want to see someone injured for the rest of their life and to fight those battles. with that i yield back the balance of my time. the speaker pro tempore: the gentlewoman yields back the balance of her time. for what purpose does the gentleman from new jersey --

mrs. mccarthy: madam speaker, i move the house do now adjourn. the speaker pro tempore: the question is on the motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is adopted. accordingly, the house stands adjourned until 10 up a bill to extend surface transportation programs until december 30. also, thou 1099 requirement in the health care bill for small

businesses. >> hillary clinton said today that the obama administration could seek the prosecution of libyan leader gaddafi for the lockerbie bombing. this alleges that the colonel was behind the terrorist attack. secretary clinton's testimony is next on c-span. after that, chairman of bernanke testifies on the economy. then governor scott walker. >> you are watching c-span, bringing you politics and public affairs. every morning in this " washington journal," connecting

you with politicians and journalists. we cannot, supreme court oral arguments. on the weekends, you can see our signature programs. you can also watch our programming at c-span.org, and it is all searchable on our video library. c-span, created by america's cable companies. >> secretary of state hillary clinton testified earlier about libya, iran, egypt, and the political unrest in the middle east. see said with these challenges, the state department for an aid budget should not be cut. she testified at the house foreign affairs committee. this is a 2 hour 15 minute

portion of the hearing. >> it is a pleasure to welcome you to our committee. after my opening remarks and those of the ranking member, i ask the summarize your testimony and then we will move directly to questions. we must maintain firm ties with our allies and enemies must be clearly identified. i hope this administration can tell who is who. in lebanon, we have witnessed the conquest of the country by xis.hezbollah a now with hezbollah in control, what is the justification for continued u.s. taxpayer

investment? in egypt and elsewhere, successive u.s. administrations failed to move beyond the status quo and prepare for the future. we should not associate the protests in jordan and bahrain events transpire in other places. we have failed to effectively use our resources to help build strong accountable institutions that protect basic human rights. this administration's crier decision to cut support from pro-democracy civil groups in egypt and the only fund groups seceded with the mubarak government is a mistake and it must never repeat. then the mistake of the bush administration and continued and that the country -- under the current administration, to get new business with the libyan regime.

john's wife, victoria, my constituent, and others are in the audience today. madam secretary, i have a letter that they have written requesting yours and director miller's help in securing information about the role of gaddafi in the 1980's and 1990. some of us objected to the normalization of relations with the libyan regime. this is proof that the oppressors cannot be coddled or engaged. then the u.n. human rights council refused to do anything about libya's human rights abuses. libya was elected to the council last year. days ago the council was forced

slaughter gaddaffi's of hundreds of people in the streets. the united states needs to condition its funding for the u.n. on real reforms. just as administration officials talk about smart power and smart sessions, when it comes to the u.n., we need smart withholding. in our hemisphere the best approach is one of misplaced priorities. a half an attorney has wrapped up its assault against the democracy movement in cuba. detaining dozens of peaceful protestors, beating a mother, and this weekend sending thugs after the ladies in white. the administration has repeatedly eased regulations on the castro regime. weeks after the latest appeasement, the dictatorship announced its intention to seek

a prison sentence for a u.s. citizen whose showed trial starts on friday. when it comes to those countries to share our values, there appears to be no end to the stall tactics. our partners in colombia and panama have gone above and beyond meeting depleting -- politically determined and ever- changing benchmarks based in the way of long-awaited free trade agreements. honduras has fought for their constitution against an attack on their democracy, and they're still suffering on the reprisals' of our state department. these examples crystallize the complaints that the american people have about foreign assistance programs trade must constituents -- programs. my constituents and others keep asking, what is the return on our investment?

a letter published wrote we are the most generous nation in the world, and foreign aid goes to those nations friendly to us. when did we hear from goodwill going toward america? some attempt to obscure the facts in novel ways, but the budget request for international affairs continues the significant increases of recent years. the cumulative $61.4 billion international affairs request is a 42% increase over fiscal year 2008 levels. the increases are more traumatic when we focus on the state department's own salaries and operations. the $12 billion state programs request is a 25% increase over 2010 actual levels and nearly 75% increase since 2008. there's also a problem of

misplaced priorities. the administration should not propose massive increases in global health and climate change programs while cutting key programs, such as the trans- sarah partnership and a partnership for regional terrorism, particularly as elm -- al qaeda affiliate's the fate of those serving in afghanistan in the country's transition to a more stable future must forever guide us. pakistan must also do more to meet the pressing the united states concerns, including the release of raymond davis, our diplomat, and shifting its approach to afghanistan away from armed proxies' and toward constructive and legitimate political partners. we must make those decisions and

light of the unfortunate fiscal realities facing our government and every american family. those who complain about diminished levels of the united -- of international affairs funding need to ask themselves, how much less would a solvent united states of america be able to do? the base line has to change. the real question is not, is this activity useful, but it is so important doesn't justify borrowing money and endanger our nation's economy? i would like to recognize my good friend and partner, the ranking member, for his opening remarks. thank you. >> thank you very much, madam chairman, and before i start, i would like to acknowledge the tremendous work of a person -- rich is sitting behind the secretary -- assistant secretary

of state for legislative affairs and he will leaving the department shortly. he was a tireless advocate for the agenda and for issues of tremendous interest to this committee, including the air around sanctions, and i would like to thank him for his service and wishing the base in his next endeavor. madam secretary, thank you for being with us did. you were in geneva yesterday, washington, today. it sounds like it is a repeat of your regular schedule. we appreciate this opportunity to discuss the international affairs budget and the various policy initiatives you have championed. madam secretary, and these challenging economic times, it is critical we make the most of every taxpayer dollar. although the international affairs budget makes up over -- only 1% of the budget, it finds some of the most essential elements of our national security. i know you are committed to

getting the most bang for the buck. in the first quadrennial review, completed last december under your leadership, the state department places a welcome emphasis on improving monitoring and evaluation of programs, increasing transparency of aid projects, and aligning projects and resources. with all due respect to my colleagues on the other side of the aisle. the responsible approach taken in the -- stands in stark contrast to the program and the preparation bill passed by the house two weeks ago. the reckless cuts in that legislation were not chosen because they look at progress and said here is something that is not working or hear something we do not need to do. no, the total level of reductions was purely arbitrary, plucked out of a hat, and totally unrelated to any thoughtful of calculation of what was actually needed and how much it should cost. their bill is not about making

government more cost effective or efficient. it does not promote the kind of reforms and streamlining needed to ensure our aid reaches those who need it most in the most efficient possible matter. it simply is a slash and burn process with no consideration for all the critically important work that is being destroyed or how it undermines our national security. the bill savages nearly every program that protects the poorest and most vulnerable people. humanitarian assistance for victims of natural disasters, pakistan, haiti -- i could go on and on -- slashed by 50%, massive cuts in refugee aid. look at what is going on in tunisia and egypt. food, aid, and sanitation, meanwhile funding for the diplomats and aid workers who carry out these programs is also slashed. if there is anything we have learned of the past few years,

-- it ought to be that we did not attend only -- only money to contractors without adequate accountability. the supporters of the republican bill overlooked two facts. first, as you and our senior military leadership has said it believed that lee, america's national security depends not only on our men and women in uniform, but also on the diplomats and aid workers who risk their lives every day to support the mayor of's interests abroad. in fact, 15% of fiscal 2012 budget request is dedicated to supporting critical u.s. efforts in the front line states of iraq, afghanistan, and pakistan. in the face of mounting deficits here at home, it is important to remember that these civilian efforts are much more cost effective than deploying our military. second, aid to others is not a gift.

the and i did states provides for assistance because it serves our interests, helping countries become more stable, were capable of defending themselves and better at: themselves out of poverty is just as important for us, our national security, and our economic prosperity as it is for them. the more we/for assistance the more we see that playing field that china, which is more than half to fill the vacuum in africa. over the past month we have witnessed ace during series of popular revolutions across the greater middle east. as americans, we are inspired to see the people of tunisia, egypt, libya, and other countries rise up the fight for universal values that all must hold dear. freedom, democracy, and human rights. we hope that the of people in the middle east will lead to a brighter future for the people of the region. we also must guard against the

possibility that these movements for change will be hijacked by those determined to restore an autocratic form of government or by forces hostile to the u.s. and allies in the region. madam secretary, as we all know, the iranian regime is continuing its efforts to develop a nuclear weapons capability, and this remains one of the most pressing foreign-policy challenges facing our nation and the international community. when he testified before this body two years ago, he pledged that the administration would pursue crippling sanctions against iran, and we have moved in that direction. last year the administration at unprecedented success in building the diplomatic support for tougher sanctions on iran at the u.n. security council. congress followed by passing a comprehensive iran sanctions accountability divestment act, the most rigorous sanctions imposed on iran.

that legislation, which was signed into law eight months ago, helped galvanize international opinion on iran past nuclear weapons program and lay the groundwork for other countries to impose their sanctions. we appreciate the fact that you have pursued the iranian nuclear threat of greater urgency and look forward to working with you to ensure that our sanctions laws are fully implemented. including against chinese firms that as you have indicated can continue to engage in sexual activity. my concern is this -- -- engage in sanctionable activity. companies need to know that there are consequences for these types of activities. so far, the company has any reason to think there are such consequences. i want to express my appreciation for the administration's recent veto of

a resolution targeted at is a powerfulh was reaffirmation of israel. once again, it is a pleasure to have you with us today, and i look forward to your presentation. >> thank you, so much. we're honored to welcome you before our committee today. the hon. hillary rodham clinton has served as the 67th secretary of state since 2009. the latest chapter in our -- in her four-decade career of public service. she has privilege as the served as first lady of the united states and as an attorney and law professor. madam secretary, your full written statement will be made as part of the record. if you would be so kind as to summarize or march, we can move directly to the question and

answer period of the five-minute rule in hopes of getting all our members to have a question before you depart. madam secretary, the floor is yours. welcome. >> thank you very much, and congratulations on your assuming your post, and i want to thank you publicly for traveling to haiti with our team on behalf of the effort that the united states is pursuing their, and i want to thank the ranking member for his leadership and support over these last years. late last night, i came back from round-the-clock meetings in geneva to discuss the unfolding events in libya. i would like to begin by offering a quick update. we have joined the libyan people in demanding that gaddafi must coat now without delay. we are working to translate the world's outrage into action and results. marathon diplomacy at the united nations and with our allies has

yielded quick, aggressive states to isolate libya's leaders. usaid has focused on libya's food and medical supplies and has dispatched two teams to help those fleeing the violence and who are moving into tunisia and egypt, which is a burden on those two countries. our combat and command are positioning assets to support these missions, and we are taking no option off the table as long as the libyan government continues to turn its guns on its own people. the entire region is changing, and a strong and strategic american response is the central. in the years ahead, libya could become a peaceful democracy, or a good face protracted civil war or more or it could descend into chaos. the stakes are high. this is an unfolding example of using the combined assets of smart power.

diplomacy, the fall of, and defense, to protect american security dowdy is. this integrated approach is not just how we respond to the crisis of the moment. it is the most effective and most cost-effective way to sustain an advance our security across the world. it is only possible with a budget that supports all the tools in our national security arsenal, which is what we are here to discuss. the american people are justifiably concerned about our national debt. i share that concern. but they also want responsible investments in our future that will make us stronger at home and continuing our leadership abroad. two years after president obama and i first act sets you to renew our investment in development and the thomas, we are seeing tangible returns for our national security. in iraq, almost 100,000 troops have come home, and civilians

are poised to keep the peace. in afghanistan, integrated military and civilian searchers have helped set the stage for our diplomatic search to support afghan-led reconciliation that can end the conflict and put out a cut on the run. we have imposed the toughest ever sanctions to rein in around past nuclear ambitions. the every engaged as a leader in the pacific and in our hemisphere. we have signed trade deals to promote jobs and nuclear weapons treaties. we have worked with northern and southern sudanese to achieve a peaceful referendum and prevent their return to civil war. we were to open up political systems, societies, and a remarkable moment in history of the middle east, and support peaceful, orderly, irreversible democratic transitions in egypt and tunisia. our progress is significant, but our work is far from over.

these missions are vital to our national security, and i believe with all my heart now would be the wrong time to pull back. the 2012 budget will allow us to keep pressing ahead. it is a lean budget for lean times. i launched the first ever quadrennial diplomacy and development review to help us to maximize the impact of every dollar we spend. we scrubbed this budget and a painful, but responsible cops. we cut economic assistance to central and eastern europe by 15%. we cut the a lot assistance to over 20 countries by more than half. this year for the first time our request is divided into two parts. our core budget request of $47 billion supports programs and promotions in every country but north korea. it is essentially flat from 2010 levels of. the second part of our request

funds the extraordinary temporary portion of our war effort, the same way that the pentagon's request is funded. in a separate overseas contingency operations account known as oco. set a covering our own war expenses to supplemental appropriations, we are taking a more transparent approach that reflects our fully integrated civilian military efforts on the ground. our share of the president's $126 billion request for these exceptional wartime costs in the front line states is $8.7 billion. let me walk you through at you. first, this budget fines vital civilian missions in iran and iraq. in afghanistan and pakistan, al qaeda is under pressure. alongside our military offensive, we are engaged in a major civilian effort that is

helping to build up the of bothnt's' economies countries. these two searches, military and civilian, set the stage for a third, a diplomatic push in support of an afghan process to split the taliban from al qaeda, bring the conflict to the end, and help stabilize the region. our military commanders are emphatic -- they cannot succeed without a strong civilian partner. retreating from our civilian search in afghanistan with our troops still in the field would be a grave mistake. equally important is our assistance to pakistan. a nuclear armed nation with strong ties and interest in afghanistan. we are working to deepen our partnership and keep it focused on addressing packets sent house political and economic challenges as well as our share threat spread as to iraq, after

so much south africa, we have a chance to help the iraqi people build a stable democratic country in the heart of the middle east. our civilians are taking the lead. shifting responsibilities from soldiers to civilians actually saves taxpayers a great deal of money. for example, the military's total oco request worldwide will drop by $45 billion from 2010, as our troops come home. our costs will increase by less than $4 billion. every business owner i know would gladly invest $4 to save $45. second, even as our civilians help bring to the's worst a close, we are working to prevent tomorrow's. this budget the votes over four.

dollars to sustain a strong u.s. presence in all places, where our security and interests are at stake. in yemen, it provides security, the plot, and humanitarian assistance tonight hawkeye that in the arabian peninsula a safe haven and wrote the kind of stability that can lead to a better outcome. it helps in northern and southern sudan chart a peaceful future, and it proposes a security fund that would pool resources and expertise with the defense department to respond quickly as new challenges to merge. this budget also strengthen our allies and partners. it trades mexican police to take on violent cartels and secure our southern borders. it provides $3.1 billion to

israel and supports jordan and palestinians. it helps egypt and tunisia build democracy and supports the security assistance to over 130 nations. some may say, what does this get us in america? and give you one example. over the years, these funds have created a viable ties with foreign militaries, and trains in each of eight generations of officers who refused to fire on their own people. that was not something that happened overnight. it was something that happened because of relationships that had been built over decades. across the board, we are working to ensure that all who share the benefits of our spending also share the burdens of addressing common challenges. third, we make target investments in the human security. we've focused on hunter, climate sherry inch, and humanitarian emergencies because these challenges not only is it written the security of

individuals, they are the seed for future contracts. we have to make investments that make our world more secure for them. our largest investment is in global health programs. including those launched by former president george w. bush. these programs stabilize an entire societies that have been and are being devastated by hiv, larry, and other diseases. they say the lives of others -- of millions of children. global food prices are reaching a all-time high. food security is a cornerstone of stability, and we help farmers grow more food and turned eight recipients into trading partners. climate change trends security and national security. our budget builds resilience against droughts, floods, and other disasters, permits clean

energy. it also gives us leverage to persuade china, india, and other nations to do their part in beating this threat. we are committed to making our foreign policy a force for domestic economic renewal and creating jobs here at home. we are working aggressively to promote sustained economic growth, level the playing field, to give one example, the aid to open skies agreement will open dozens of new markets to american carriers. the miami international airport, which supports 300 jobs, will see a great deal of new business thanks to agreement with top trading partners brazil and colombia. fifth and finally, this budget funds the people and the platforms that make possible our quest everything i have described. it sustains its diplomatic relations with 190 countries.

it finds political officers who are literally right now out working to defuse political crises and promote our values, development offices the spread stability, and economic officers who wake up every day thinking about how to help put americans back to work. several of you have already asked our department about the safety of your constituents in the middle east. this budget helps fund the counselor officers, who evacuated over 2600 people from egypt and libya and nearly 70,000 from haiti. they issued 40 million passports last year and served as air force line of defense against terrorists seeking visas into our country. i would like to say a few words about the funding for 2011. as i told the speaker and others, the 16% cut for usaid pass the house would be devastating for our national

security. it would force us to scale back dramatically on critical missions in iraq and other places. as secretary gates and others have emphasized, we need a fully engaged and fully funded national security team, and that includes states and usaid. and moments of temptation to resist obligations beyond our borders. each time we have shrunk from global leadership, events have summoned us back, often cruelly, to reality. we save money in the short term when we walked away from afghanistan after the cold war, but those savings can at an unspeakable costs. generations of americans have grown up saved because we chose to lead the world in tackling the greatest challenges. we invested the resources to build up democratic allies and

vibrant trading partners, and we did not shy away from defending our values and seizing the opportunities of each new era. i have not traveled more than any secretary of state in the last two years, and i can tell you from firsthand experience, the world has never been in greater need of the qualities that distinguish us. our openness and innovation, our determination, our devotion to universal values. everywhere i travel, i see people looking to us for leadership. sometimes i see them after they have been done thus publicly on their television channels, that come to us privately and say we cannot do this without america. this is a source of great strength, a point of pride, and i believe an unbelievable opportunity for the american people, but it is an achievement, not a birthright. it requires resolve and resources. i look forward to working closely together with you to do what is necessary to keep our

country safe and maintain american leadership in this fast-changing world. thank you. >> thank you. i will begin with my questions. former libyan officials are claiming to have proof that gadaffi ordered the attack of pan am 103. what is this american -- administration doing, and is unwilling to impose a no-fly zone over libya, and when will the administration expand the asset freeze to include those identified on the united nations sanctions list and also when will we institute a travel ban, and what is the role of our u.s. military in the region, humanitarian support, along with our allies, limited to that? on iran, i remain concerned that

the department is not fully implementing the iran sanctions law. can you comment on the status of the five companies that the administration waived sanctions against through the utilization of a special role based on their -- rule based on their pledge to cease and the estimate in the energy sector? will you comment -- would you commit to brief the committee, your staff, on the status of all investigations that the administration is undertaking on iran sanctions law? i asked for u.s. protection for the many residents avi camp ashraf, many of whom are concerned about their relatives. thank you. >> that you very much, and let me begin by saying when it comes to libya, the united states has led the way in

imposing very strict sanctions, in our finding assets and preventing assets from going to the gadaffi family or leadership. we have also worked with the european union and member countries because they also have many assets from the libyans that they are tracking and freezing. we also, as you know, passed in a very quick, aggressive men a, a strong security council resolution on saturday, which is the entire world target of sanctions, humanitarian assistance, and yesterday in geneva, i had the opportunity to discuss what could be done and there will be an additional announcements coming from other countries, coming from the e.u., and united states continues to look at ever single lever eight kidneys against the regime. where will aware of the ongoing

efforts by colonel gadaffi to defend the area of tripoli and a few other places that he continues to hold. the opposition forces have been working to create more of a military presence so they can not only defend the places they have already taken over, but also try to tripoli away from colonel gadaffi. are also conscious of the desire by the libyan opposition forces that they be seen as doing this by themselves on behalf of the libyan people, that they are not influenced by outside influences by external force because they want this to be their accomplishment. we have also, with our nato allies, which the pentagon, begun to look at potential

planning, prepared this, in the event we feel is necessary for both humanitarian and other reasons that there would have to be actions taken. one of his actions under review his a no-fly zone. there are arguments that would favor it. there are questions that would be raised about it, but it is under consideration. with respect to iran, and i know the time is short and i want to be able to supplement any of these questions with written material, we are seeing the difference that coordinated sanctions can make. not only with what the united states did, but the cooperation and the leadership of congress, the legislation, that added to the iran sanctions act, gave the united states many more tools, but also because of the international corporations to the united nations security council. and to add additional at-on sanctions from our partners, including the e.u., japan, and

others. when you are trying to sanction iran, no matter how powerful you are and how much we can do, it is imperative that we get the international community to support it. otherwise, there is too much leakage. we have limited that, and i feel strongly that we are making an impact. >> thank you, and i request written responses that you offered to the questions that you are not able to answer because i have so many, including the deposition of the libyan officials, which is so timely. my good friend, the ranking member. >> i want to commend my colleagues on the committee the speech that secretary clinton gave in addition to her estimate -- excellent testimony, but yesterday, going to the human rights council, where she discussed libya, iran, and other issues come up quite a remarkable presentation, particularly in pointing out

ypocrisy of ouriran's condemnations of libya. i would like asked -- try to get into issues in this short time. one, the israeli-palestinian process. the question, and i ask this because i struggle in my own mind with their right approach at this particular point. as the emergence of protest movements to the arab world altered the dynamics of the peacemaking? given egypt's propagation with its internal issues, i assume egypt will not be very involved in israeli-palestinian diplomacy. how important is the removal of egypt from the peace process equation? is this a time when we should be pushing for with peace efforts,

or should we wait for the regional dust to settle, to use that metaphor here, before making another push? what do you anticipate from the next court that meeting, which is likely to take place this month? i have one other question after that. >> thank you very much. we believe that a continuing effort on behalf of that two- state solution is in israel's interest, and in addition to that, in the interests of presenting a very affirmative effort in the midst of all this turmoil and change. our work continues, and we understand that changed landscape very well. one thing that both the israelis and palestinians depend on was egypt's support at camp david, the support for the peace

process. i was pleased that the supreme council of the armed forces in one of its earliest actions declared that it would respect the camp david accords. that was a very important message. we have made it clear to our egyptian counterpart that we expect that and will do everything we can to support it. i think it is fair and ask, given what is going on in the region, what is the chance for any kind of breakthrough for resolution of these ongoing matters? we know it is that called at any time, but we believe that this is an opportunity for israel. there was a speech that prime minister netanyahu kate yesterday, as reported in our press today, in which he says he is well aware of the growing isolation of israel in the international community. that is not good for israel's

economy, not good for their position and leadership. i know that prime minister recognizes that we have tough decisions ahead of us. we worked extremely closely with the israeli government, and we will continue to do so as you and others have noted. the security council of the united nations is not a place for these kinds of negotiations, but trying to get parties back to direct negotiations remains our highest priority. >> thank you very much. across the middle east in north africa, as we have noted, we are witnessing a transformational moment. these countries will meet external support as they undertake what we hope will be successful transition to democratic governments. will the u.s. be able to provide sufficient support to the transitional government in egypt and tunisia, and being prepared

to assist in other countries as needed, we look at what is going on in libya, bahrain, jordan, yemen, and are we going to keep in place the current policy that restricts usaid providing democracy and government support under's not registered the egyptian law? >> first, we are going to do everything we can to support this transition to the promise -- to democracy that is under way. each country is different, and each country wants different things from us. they want either economic aid or they want the full menu of support on politics, governance, human rights, and the like. it is our intention, as we have already communicated with teams that we have sent out under secretary bill burns. he has finished an intensive tour of the region, talking to

the leadership in key countries, that we will stand ready with $150 million of money in egypt, for example. where trying to better coordinate with our european and other partners are around the world so we do not duplicate what is being done. with respect to the question about getting money into certain organizations and individuals -- >> i'm going to be a little with was, because i wanted all of our members in. they use so much. i know my good friend understands. pleas yield five minutes to the chairman of the subcommittee, chris smith of new jersey. >> welcome to the committee. i returned from visiting our friend and ally japan, where i spoke with members of the foreign affairs ministry, regarding the fact that japan has become a destination

country, a haven for international child abduction. our officers were extremely competent and apathetic. there are at least one had a 71 children and 131 broken hearted parents who are 6 to even see their children. we want japan to sign the convention, but that treaty will not solve the current cases, and they stand a great risk of being left behind a second time. what is the administration's plan to resolve the current cases? president obama has met for the prime minister. did he personally raised the issue of those children and their parents? i would also like to ask you since 1979, brothers and sisters had been illegal in china as part of our barrett one child

per couple policy, and the u.n. population fund hasupported and defended and promoted and even celebrated these massive crimes against humanity. the facts are these, uncontested, in the chinese woman, mother without a birth permit, is put under course of pressure to abort, physically forced to do so. all unwed mothers are compelled to them -- to abort their mothers -- their child, in what could be described a search and destroy mission as part of a eugenic problems. chinese impose duties on any woman who lacks permission to give birth or even a detection. there is note date -- doubt that the u.s. support of this policy has led to the worst gender disparity in any nation in human history. where are the missing girls --

dead, cause they were aborted, destroyed over 30 years by selective abortion. today there are as many as 100 million missing girls in china. the societal implications of this policy are absolutely staggering. according to the who, according -- 500 chinese women commit suicide every day in china. they have become a magnet in sex trafficking due to the missing girls of china. in light of this massive ongoing crimes against women, i would like to know if you or the president raised directly in a face-to-face manner the issue of forced abortions in china when the president was in washington? >> that me start with your visit

to japan, and thank you for bringing greater visibility to this problem that i am concerned about. in fact, for the first time i created in the department the current position of special adviser on children's issues, something that i have worked on for my entire adult life, and we are engaging foreign governments to go ahead and join the hague conventions, both on child abduction and adoption, and i have raised in every meeting that i have had with my japanese counterparts, and i have had many japanese counterparts, because the governments have changed. i know the president has also raised its. i appreciate you're going to japan and i thank you for the kind words about the counselor of affairs officers there because this is the highest priority level in the administration. it does not only japan, but japan of fortunately has many

more of these cases. we're concerned about south korea and many other countries in asia, and our special adviser posted a meeting for all our sheath -- cheifs and other countries, to encourage this be put on the top of the list. with respect to the pending cases, i believe if we can get the conventions approved, we will have a stronger argument on the pending cases. i think there will be a recognition that japanese society has changed its views about how these cases should be handled, and i think that will open more possibilities for the families that are unfortunately suffering from the abduction of their children. with respect to china, it's one child policy, forced sterilization and abortion -- >> i'm sorry.

the ranking member -- is recognized. >> madam secretary, it seems like yesterday, a fruit vendor to avoid of -- devoid of a future that himself afire, and it is not what it used to be. not for the middle east, not for the rest of the world. we have seen things that we did not necessarily anticipate. others are watching it carefully as well. we see people demonstrating in the streets and countries which, to our amazement, are not holding up signs that say that to america or death to israel or anybody else. they are raising their own flags proudly without burning

hours. they are holding up signs, signs that are in english. refer to meetings and made statements on tv and told you things. these are people who are publicly -- their hopes and their dreams are directed toward us. they are talking to us and our language. it is fascinating. we have to have our plan -- a plan. they're looking westward. others have been caught flatfooted as well as have we. d.c. a young man who was one of the leaders in egypt, and islamic secular young man who asked who he wants to me, and he does not say mohammad the prophet, he says marked zuckerberg, the jew. this is a new generation of people. they have not been sent out to the street to die, but parents

who are willing to die for the next generation. they are looking to us to help them. what are we going to do? the opportunity is here. why don't we come up with something out of the box, something creative? pick 500 of the finest young when -- young women and men, and to egypt, let them start businesses with these people, that the work together, find their own future, that them find a way that they have indicated in the streets in which they are demonstrating that they want to go. this is a new direction. let's not wring our hands. the future is not there for us to react to. the future is for being made. do we have a plan? >> we do. we have lots of plants. i am excited by your idea, and i would welcome every member of this committee to offer ideas that would give us additional ways of interacting with the

young people who are at the base of these transformational movements. let me say three quick things. we do have a lot of ongoing efforts that have been funded by this congress over the last many years for entrepreneurial training. the president had an option for neural conference last year where we brought people from muslim-majority countries. i run into them all the time. we have a website that keeps them in contact that helps to mentor them. we can build on that and make it greater. we have a lot of the -- programs and the so-called nerd programs, that have played a major role in bringing a lot of these of people to the united states on international visitors per rams, reaching out of them, where they were in their own countries. we have to continue that.

this is a labor-intensive program, and we hope to get the resources to do that. we have increased dramatically what i call 21st century statecraft so that we have a social network connection system where we are talking to people in arab andic -- in arabic and farsi, and i have -- we have to be conscious and aware of what people want from us and what they do not want from us. that is the vaulting. our embassy and bill burns has been meeting with representative groups of young people who come from the entire political spectrum because we do not want to make the mistake of not including in our dialogue those

with whom we have difficulties. we also want them to feel that they can realize democratic aspirations, which is more than just having an election. there's a lot to be done, and i think your idea is a good one, and i will follow up on that one, congressman. >> thank you. mr. burton from indiana is recognized for five minutes. >> and secretary, we take an oath of office when we become a congressman, and you, as secretary of state, to protect united states from enemies, domestic and foreign. one of the concerns i have is our dependence on foreign energy. right now, we import 65% of our energy from outside the united states. when we had the embargo in 1972, we imported 28%, so we are importing more than double the amount of energy than we did

back then. the concern i have is the unrest in libya and egypt -- if you look all the way across the northern tier of africa and into the persian gulf, you will see that the potential for unrest is really severe. i know you are doing your best, but nevertheless there is still the problem. if the streets of hormuz is bottled up, we could lose at least 30% of our energy. we're dependent on the part of the world. this country has not moved toward energy independence at all in the last 40 years. we were importing 20% back in 1970, 1972, and now it is 65 percent said. -- 65%. mr. pickens was in to see me a few weeks ago, and he said we had the ability become

independent if you want to do it. but because of an apartment of concerns, where not moving, not telling off the continental shelf, not drilling in the gulf of mexico, not drilling in the anwar, and we have maybe billions, trillions of oil shale that can be converted into oil, and we are not doing anything about it. we are increasing and in continuing to depend on foreign sources of energy, and this administration is doing absolutely nothing to deal with that, and they are impeding our ability to become energy independent. we have got to do something about that. if we have everything go to hell over in the middle east, and if our good friend in venezuela, who is working with iran, if they tried to put the kibosh on

us, we are in trouble. can you imagine if we are not getting energy in the united states? my question simply is this -- why is this administration and u.s. secretary of state are one of the leaders supposed to make sure we are protected from enemies, domestic and foreign, and rightright now, you know, bu have been over there, you know of the problems we have in venezuela. you know of the problems and you know of our dependence on foreign sources. it is time to get on with it. we need to do what is necessary to become energy independent. the experts with whom i have talked, and i have talked to many of them, tell me we can become energy independent in the next decade if we really want to. in fact, if we convert our tractor-trailer units to natural gas, we could reduce our

dependence on foreign oil by 50% in the next decade, just by doing one thing. you, as secretary of state, i implore you to go back to the president and say that this is not just an economic issue. this is a national defence issue that we are not doing anything about. and we need to get on with it. >> congressman, i actually agree that our energy dependence is a national security issue. i authored some of the earliest legislation so we would begin to look to alternatives, so we could begin to use a large defense department budget to try to explore what could be done. i do not think there is any one answer, however. i do believe -- and i followed up on that by having the first international energy coordinator. i recommended that we had a whole bureau dedicated to energy

because i do see it, as you do, as a critical part of our national defense. i will take issue, as you might expect me to come up with the characterization of what this administration has done. there were a lot of programs and a lot of funding to move toward energy efficiency, which every expert i talk to says has a dramatic impact on reducing our use of foreign and domestic sources. that does not mean that we do not need to look carefully at what else we do in terms of drilling and a lot -- and the like. that is a longer-term prospects. i think some of the short-term decisions being made by the congress undermine our march toward energy independence. i think we need to look at the full menu of what needs to be done. >> madam secretary, it is so is a pleasure and a personal honor for me to welcome you before this committee. i am sure our nation deeply

appreciates the service and the outstanding demonstration of your leadership as the president's chief diplomat representing our nation throughout the world. just yesterday made a very important speech before the united nations human rights council in europe. you are making a serious effort to save what is left of the state department's proposed 2012 budget, which, in my humble opinion have been hit with a machete and a sledgehammer. in order for your department to carry out its many responsibilities throughout the world, how ironic, madam secretary, that here you are, and yet your department's budget is less than one-half of a percent of the u.s. gross

domestic product. madam secretary, understand that some of our colleagues -- the majority have suggested that we should use the 2008 budget operations as the benchmark for the 2012 budget cycle, which means a reduction of about 42% in the administration's proposed budget. my question is, would your department be able to function of these kind of proposed cuts the we are now considering seriously in congress are passed? >> i hope we do not get to that, because it wouldn't -- it would seriously affect the mission that the state department and usaid have been assigned, not only by this president but by the prior president. when president bush and the bush and administration signed, for example, the strategic framework agreement with iraq, it was

filled with the kinds of work that was supposed to be ongoing in order to solidify the relationship that had been built after our military leaves iraq. i cannot stress to you how strongly i think it is imperative that we continue our mission in during -- our mission in iraq. we are talking about democracy is in the middle east. forget about how they got there. the fact is, they're trying to have a democracy. >> the question is, are you going to be hurting? >> well, it is not me, but our country that would be hurting, would be devastated, in my opinion. >> i have a laundry list for your consideration. two months ago, i submitted a strong letter to assistant secretary in your department concerning abuse of mistreatment

by the chilean military forces against the people of eastern island. unfortunately, i have not received any response from him. i do not know if he was sick burgess did not appear to bother to respond. madam -- or just did not care to bother to respond. madam secretary, i am wondering if there is any of our nation more details regarding the suffering of tens of millions of indigenous people living throughout latin america. their problems are social and economic, in terms of their critical situation. also, the administration had a recent announcement bennett -- announcement that you were going to bring usaid back to the pacific. do the budget cuts mean that there is going to be no usaid for the pacific region?

these are 69 nations that really have a need for this program. -- 16 island nations that really have a need for this program. and would like to push for the countries of laos and cambodia -- it has been going on now for 30 years and i still do not understand what happened. >> i will get answers on of these, but let me respond about the usaid presence in the pacific. here is an area where we are finding large energy deposits off of papua new guinea. there is a huge deposit the exxon mobile is developing. we are in a competition with china that is unbelievable. they are expending enormous amounts of money. they have a huge diplomatic presence. the least we could do is have a

usaid office in delaware new guinea so that we can fly the flag -- in papua new guinea so that we can fly the flag and people will know we care about them. >> china has a $600 million program. what do we have? 0. >> we have worked with the united nations significantly, and china is working very hard to undo that. >> first of all, madam secretary, let me compliment you on your energy and clarity. after arriving here from intings in europe's -- europe, and arriving late last night, i do not know how you do it. you have done a terrific job been advocating what your it ministration wants you to advocate. -- you have done a terrific job

of advocating what your administration wants you to advocate. did obama confront president hu jintao on the issue of forced abortion? i think that could probably be answered with a yes or no? >> we consistently raise that with the chinese. >> was that a yes? was president who -- was president hu jintao actually confronted? >> the cannot answer yes or no. i can tell you that we consistently raise it with our highest diplomatic encounters. >> has president hu jintao been confronted with the issue of forced abortion by our president? >> i will have to get an answer for you, but let me say that this is an issue that i started racing in 1995. -- raising in 1995. i continue to raise it. i am the chief diplomat and i

raise it in every scenting that i can. >> you cannot get -- in every setting that i can. >> you cannot get an answer now, but we will call you on this. >> i will certainly do that, and let me just quickly add -- >> madam secretary, i only have a couple of minutes, and i agree with the question, but i was also doing mr. smith of favre. i would like to ask you a lot -- a favor. i would like to ask you a little bit about foreign aid. when we are talking about the amount of money being sent, the billions of dollars, does it make sense at all for us to be borrowing money from china and giving it to other countries, especially giving it back to china?

in your budget request, you are asking for $1.3 billion to the global fund. the global fund assistance program. china happens to be the fourth largest recipient and has received almost $950 million. now, what sense does it make for us to borrow money from china and then give it back to them in a grant, and then we are paying the interest on the money that we borrowed from them? this is insane. >> well, congressman, you are not going to get an argument from me. i was part, in an indirect way,

of the last administration that balanced the budget, and i wish we had stuck with it. i think we need to balance the budget, and i do not think it can all be done with slashing foreign aid and the defense department budget. with respect to that, i do support the global fund. it has been a sufficient way for the united states to amplify our with regard to that far. china has stepped up in a big way from the time when they denied they even had an hiv/aids problem. >> so, the answer to my question is, yes, it does make sense for us to borrow money from china and give it back as a grant? we can disagree as to what and who caused the problems for our economy. but we are 1.5 trillion dollars more in debt this year and the

year before, since this administration has taken power, as compared to the last year of the bush in administration. whether or not he was responsible for that, we should talk about later. let me ask you about aid to pakistan. again, we only have a few seconds here. pakistan has received billions of dollars worth of aid, yet they have a u.s. citizen who is now being held under very questionable circumstances. are we going to keep giving money away to people that support the taliban and put our intelligence assets at risk? >> congressman, we are working very hard in order to achieve the release of mr. davis. it is one of the highest priorities across our government. we do believe that the combination of military and civilian aid that we have pursued with pakistan is in

america posole interest. >> -- is in america's interest. >> let me just rush in and say that it is so great to see you again. let me commend you, madam secretary, for the work that you continue to do with the firmness and knowledge of world affairs. i am also very distressed at the h.r. 1, as relates to our role foreign affairs issue, family planning, debt restructuring, haiti, international disaster assistance, help with clean

water, emergency shelter, rape prevention, refugee and migration assistance, the peace corps -- which everyone says is the greatest program in the world in terms of what we get back for our investment, and i could go on and on. this is all to meet in st. -- to me, insane. this is not going to solve our problem in this country, by taking 1% and putting it in half -- putting it in have -- cutting it in half. i would hope that there would be some changes on the way in the budget question. let me ask quickly, some

questions in regards to sell sudan -- south sudan. will budget cuts affect us getting in there and assisting that new government? we are concerned about darfur. we cannot give up tough sanctions on the regime until the transition is concluded in self suzanne -- south sudan. upl soak the we could step our support for it -- i also hope that we can step up our support for the transitional government. i think that we can secure that area. i will stop there for a moment

to give you an opportunity to answer. >> i appreciate you listing the cuts, because obviously those will have a dramatic impact on our ability to wield our power. that is what i am interested in. i am interested in results for america. if we are going to people empty- handed, or we are having to close offices or cut the program so that we do not have a relationship that enables us then to turn around, as we did with the egyptian military and say, hey guys, remember us? we trained you, we worked with you, here is how we think you can do it. we will be weakened. that is the bottom line. it is not like there is no competition out there. iran is competing with us. china is competing with us. we have people who are more than happy to step forward and fill the void that we left behind.

the conservative government in the united kingdom actually increased their development budget while they were cutting everything else. they said, you know, if we do not compete, if we are not present, we are really going to be off the map. they are actually increasing their development budget. on these issues, you mention south sudan, darfur, somalia, the united states is the major player. i think we deserve a great deal of the credit for helping be sudanese referendum -- of the sudanese referendum to go peacefully. we are engaged in resolving that. we are still focused on darfur. you mentioned somalia. we are the largest supporter of the african union forces that are in there. i could go around the world and

point to where our aid and our diplomatic efforts coincide with our security challenges and what our military is doing, and places where our military is not present where we are the only representation of american power. it is up to congress to make this decision, but as i said in my opening remarks, every time we have pulled back, we have paid a bigger price, and that is what i am worried about. >> it has an impact on our chocolate industry, which is a big industry in new jersey. >> subcommittee chair on asia and the pacific. >> madam secretary, it is good to have you here this morning. i represent a district in illinois not too far from part rigid -- park ridge.

26 percent of our manufactured items are exported. we have a written belsen -- we have over 10,000 jobs and we trade with multiple countries. last december, you signed the wellington declaration that strengthen our ties to that part of the world. we got out two hours and 21 minutes before the earthquake hit. >> i know. >> our relationship with new zealand and australia is extremely important. the prime minister will visit the united states next week and speak before a joint session of congress.

there in the process of reauthorize in their patent system, which will remove patent protection. we discussed that at length with the trade minister. the australians are in the process of adopting rules for tobacco that adversely impact the use of trademarks. many people see the use of the patent system to enforce social change as enduring the united states strength in pat laws as we know them. -- patent laws as we know them. nine countries have been involved in those negotiations which go back 10 years through

several different administrations. theft of intellectual property in china is continuous. outright theft from american businesses, including several in my district -- my question to you is, are you aware of these patent issues and trademark issues? i would like to know your thoughts sunlamps -- thoughts on them and what america is going to do to try to turn around new zealand and australia to a higher level of patent protection. >> first, let me say how glad i am that you and your large delegation were saved. we had some very tense moments making sure that the americans that are part of this lapse into part of this large delegation were accounted for.

we work closely and it is absolutely essential that we work with our friends and allies to make sure they'll understand the implications of some of their internal changes. i share a year concern. we obviously have the biggest stake in the world in improving protection of intellectual property. we do not want to see close friends and allies remove those protections. you point out that china remains the largest violator. what we're trying to do is push them to recognize that they too will want that protection for their intellectual property as they continue to develop. we are working on this. we are aware of that, and i will keep you informed of how the negotiations proceed. >> thank you. i yield the rest of my time. >> wowee.

thank you, man of the year. >> i join in amazement at your energy. is exceeded onlay by my amazement that he yielded the part of his time. i think this is the first of your four hearings over the next two days. i have so many areas to pursue that i will put most of my questions in the record. you will have a few minutes of relaxation. regarding the trade agreement, what worries me is goods coming into this country duty- free. the automobile is made 65% in china, then taken to south korea where it is finished by chinese

guest workers, and then brought in to the united states duty- free having never been touched by a south korean worker. i know your staff is working on a response to a concern i raised regarding industrial zones in north korea. the south korean ambassador to the united states is on record as saying that he believes the free trade agreement will pave the way for goods entirely produced indies slave labor resounds to enter the united states -- produced in that these slave labor zones to undo the united states duty-free. -- to enter the united states duty-free. all the more reason we need to address this.

the goal has got to be jobs. sometimes, liberalization leads to exporting the jobs. if something is taken off the munitions list, then it can be manufactured in china and imported into the united states. tools, dies, plans, technology can lead to the goods being produced abroad. but no priority is given to those things that produce more jobs -- i hope priority is given to those things that produce more jobs, not more of shoring. -- off shoring.

the question for the record is whether the u.s. is actually prepared to make china a major trading partner of the united states -- prepared to sanction china, a major trading partner of the united states. as to the caucuses, the defense of azerbaijani state is seriously recently that his country is preparing for war. i hope you could discuss the repercussions they would face if they renewed their conflict. as to the organization known as the me-k, the u.s. court of

appeals for the district of columbia has required the state department to review its decision. a number of well respected foreign policy experts say the me-k should be taken off the list. this is the only thing that howard dean and john bolton agree on. >> [laughter] >> i asked for a classified briefing from the subcommittee. the intelligence committee provided it and frankly, after that classified briefing, i thought perhaps there was nothing done this century that justified the me-k being on that it substantiated the belief that it is on the list as a peace offering to to iran.

finally, the issue of libya. it may in the future be good policy for us to arm the army if it ever organizes itself, if they have a functioning, a provisional government. i wonder if you have begun a review of u.s. sanctions and u.s. law to make sure that americans could legally do that should you decide that is good policy. if god forbid there is a major conflict around tripoli, let's make sure the right side wins. >> madam secretary, without objection, members may have five calendar days to submit questions for the secretary. we hope to get some answers to those important questions. >> i ask unanimous consent that my letter be made part of the record. >> without objection.

>> madam secretary, on the question of libya, one important resources could be libyans and libyan-americans. i spoke with one person this morning. the administration had some observations. some of those observations had to do with what we did not do in bosnia, in terms of jamming radio stations. i carried legislation on doing this, but we could not get it through until the bombing started. one of the lessons is, when the dictator is saying you should kill your own people, he is jamming his son stations.

why do we not put the assets up to take -- his own stations. toy do not put the assets uppe take care of that? why did the egyptian soldiers not shoe? why did they not fire on their own people? it is an information war. i would like your response to that. i was also open to ask you briefly, in terms of another problem on the african continent, the lra. this is a fellow who exists to pillage. he grabs child soldiers out of the villages. he grabs children and converts them into soldiers. we're asking for authorization of the plan. i would ask you about implementation of that plan to remove him.

>> congressman, i think the head is you have offered regarding libya are ones we are -- i think the ideas you have offered regarding libya are ones we are certainly considering. i also think that this is an information or to a great extent. what we have been trying to do is rebuild our credibility so that what we have to say will be listened to. i did a web chat with an egyptian website. we had two days' notice and 7000 questions. people are really anxious to hear from us. they are also anxious to hear from each other, like the soldier idea, which i think was a terrific one. we will follow up and give the more feedback about what we're doing. i could not agree more about the horrors of the lra.

this is one of the great criminals of the last 50 years, who has pillage, rape, adapted, kidnapped, -- abducted, kidnapped, killed in the worst possible way. he unfortunately has been harder to get them we would have thought. we have had a lot of support from partners and allies, but he has escaped accountability. we are going to continue to pursue that, and we appreciate you keeping that in the spotlight. >> with regard to the request north korea is making for food aid, we have had hearings here in which a french ngo testified that they traced the food aid they had previously given and being that it ended uppe sold for hard currency for the regime.

what she testified to us was the same information that we had also received from mr. watt, who was the minister of propaganda for 50 years, and he defected. a central committee member in north korea had told the press yesterday the same thing he had once told us. the quote is, "we must not give that food aid to north korea. in doing so is the same as providing funding for north korea's nuclear program. " one of the ways they get a in

funding for the program is through the financial support they receive. i was going to say that, i think it is wise counsel that we not do that. what is your opinion? >> thank you, madam secretary. >> i am glad you agree. i think you agree on non-. >> -- agree on that. >> madam secretary, it is great to see you. i want to commend you and all of the diplomats for the tremendous work you are doing in the state department to ensure diplomacy globally. purer in in indeed making america a safer and strong -- you are indeed making america a safer and stronger nation. a foreign service officer has

done a tremendous job and exemplified the great people that you have in the foreign service. i have particular questions to ask, and time is limited, so i will ask them for the record. i want to preface my statement with an overarching concern for the present budget as proposed by the current majority party. now that our reputation is being restored and we are affecting positive change, is this the time we really want to call back funding for a critical programs and initiatives? this is downright dangerous to our national interests. when you talked earlier in even thougheurope,

they are tightening their belts, they are also putting more into foreign aid. we need to hold up our end of the bargain when we are talking about foreign aid. that brings me to the specific point of, almost half of the funding being cut from dp migration budget -- from of the migration budget. i am very concerned about afro- colombians and the indigenous. will we lose any of the progress we have made to make the alliance more secure as a result of our own hemisphere or our own industry more secure? my question is, sinc julye million -- since the united states is a leader, how could

reducing funding for report displaced population -- for displaced populations influence of our authority in places like pakistan and afghanistan? >> thank you for raising the refugee assistance issue. the united states has been and, i hope, will remain the leader in dealing with refugee challenges, internally displaced people, people fleeing from conflict. it has been one of the areas where we are able to claim that we put our values into action, because we are there on the ground. you have been in refugee camps. you see the u.s. aid sign there. you know what it means to have

experienced development experts in pakistan, haiti, or anywhere else. this is an area of particular concern, the we be prepared to continue this humanitarian work. i thought that when we go into these post-conflict, post- diplomatic situations, we should be sure that the united states brand is front and center. there was, when i got there, a feeling that we should not be trumpeting our own horn. my feeling is, if the american taxpayers are putting their money out there, if people do not want american aid, if they do not when usaid and other programs, we will not go there. but if they're going to take it, we're going to advertise it.

it's what i found traveling around the world is that a lot of people did not know what we did. they said the chinese are doing that. the french should doing that. so and so are doing this. i said, yes, we have more money in there and then all of them combined, and we should get credit for it. i want to build the american brand again so that when people get food, clean water, shelter, they know where it came from. it came from the generosity of the american people. this is for me a big issue, and we are doing even more to get that message out so that we can be the leader that i think the american people, with their generosity, one does to be. >> the other concern i wanted to raise was of the distribution network and how effective it has been for u.s. efforts in afghanistan. what can be done to improve u.s. relations more broadly?

again, we have not connected with all of those countries better such an important part of the world. >> absolutely, that is a big part of it. >> i am now pleased to give five minutes to the is chairman of the subcommittee on asia and the middle east. >> of the remind some of my colleagues on the other side of the aisle who keeps -- let me remind some of my colleagues on the other side of the aisle to keep the moaning the cuts in the cr that we are broke. the last congress could not even pass a budget for the first time in 35 years, at least in the house. they could not pass appropriations bills to keep the government functioning. that being said, let me begin with libya.

it is difficult to look of the initial u.s. response to the unrest in libya and think of any word other than "tepid." although the administration said its initial reaction was tempered in order to avoid provoking a hostile situation, such fears did not seem to hinder other nations. the british dispatched the least two warships during their evacuation operation. at the same time, our rented ferry was stuck in board because it could not initially make a journey across the mediterranean. everything we have learned about the regime over the past decade has indicated that the leadership responds to force or the threat of force. for example, after muammar gaddafi looked at the ease with which to the u.s. military, at least at first, dispatched the u.s. -- dispatched to the iraqi army, he feared they might be

next. he agreed to turn over his entire wmd program. the british and chinese effectively told gaddafi that there was a steep price for intervening in their evacuation. why do we not do a thing? although we now have forces off the libyan coast, howard unwillingness to use this force to protect our -- our unwillingness to use this force to protect our own citizens has a it caused many to believe we have a weakness of will. >> first, let me say that other countries do not have the same history with libya that we do. if you look at some of the early statements that were coming out of gaddafi and his leadership team, they did not talk of the chinese-american -- they did not talk about the chinese, they talked about the americans.

our embassy was overrun before. in an l that we did this ani effective and prudent manner, and we did it in a way that did not ring alarm bells around the world that we were about to invade for oil. across the middle east, there is a constant grumbling that the united states is going to take over libya for the oil and we cannot let that happen. well, we are not going to do that, and we are going to side with the libyan people in their aspirations, but the last thing we want to do is start off with military assets when we need to get our people off the ground. i disagree fundamentally with your assumption. i see no evidence that anyone thinks less of us because we were smart about how we got our people, not only our embassy people, but american citizens

working in libya, out safely. as soon as we did, we lead the way at the security council in pushing beyond rhetoric with europeans and others. it is easy to make a speech. it is harder to impose sanctions, freeze assets, stop arms, etc.. printing we have done this in a very effective way. >> -- i think we have done this in a very effective way. >> let me move on. during the latest round of negotiations with the iranian regime and its symbol, the iranians or adamantine emphasis -- in instanbul, the iranians were adamant. it is unclear what the administration's position on this issue is. the letter cited reports suggesting that ministration is open to an indigenous it uranium

enrichment capability under certain conditions. one plan would allow iran to maintain 4000 centrifuges. even went so far as to suggest during an interview with the bbc that iran has a right to enrichment. we are not clear on this point. what is the administration's position on iran pose a claim that they have a right to an enrichment program -- iran posole claim that they have a right to an enrichment program that they have a right to an enrichment program on their soil? >> it has been our position that iran, sometime in the future, having responded to international concerns and having irreversibly shut down nuclear weapons programs, have the right. i think that is the position of

the international community along with the united states. >> thank you. i interrupt because we have limited time and everyone wants to ask a question. i apologize. >> thank you and welcome. on behalf of the people i represent in misery, we appreciate you being a in a one- person voice of america at a time when we really need it. i really wanted to submit two questions to you in writing, one about our continued work -- we had an oversight committee hearing last year and we would like to get an update on the reconstruction and how that is going. also, i will get a written question interview about the ongoing engagement and need for

constitutional reforms regarding hiring agent with the eu. but i would really like -- regarding our engagement with a year. -- with th eu. looking beyond our traditional state tuesday diplomatic efforts to psittacine to citizens -- state to state diplomatic efforts to citizen to citizen diplomacy. a student came up to emea washington university who studied in cairo the previous -- came up to me at washington university who studied in cairo the previous year. those kind of engagements are so critical in those countries. could you talk about that? >> i agree with that completely,

congressman. if i could double or triple our student exchanges, particularly into this region right now, where we have more of our students going to cairo, to places where young people are voicing their desire for democracy, and more people coming from those regions. we have tried to increase our international visitors program, but i am a big believer in people to people diplomacy and i would like to see us use more of that. >> what about the use of new media? >> we are moving very rapidly on the use of new media. we have an extraordinarily team of young people, as you might expect, who are leading the charge on this. it has totally changed how we are communicating because twitter, facebook, they are in real time. you cannot overlook broadcasting. frankly, i wish we were doing a better job and our broadcasting

efforts. i met with the new chair of the broadcasting board of governors. al jazeera is a 24/7 entity. the chinese have started an english-language television award. the russians have started an english-language television network. we should be, by far, the most effective in communicating. yes, a social media is important, but still, most people in the world get their news and images from television and radio. we cannot forget all media while we tried to break new ground in new media. >> thank you. finally, i wanted to touch on another hearing that we had last year. we were talking about women's empowerment worldwide. i have concerns about the recent passage of the cr, the reduction in international family planning and global health, some of the programs that george w. bush was so supportive of.

could you talk about how this women in developingn communities, and how this will impact our country? >> this is very close to my heart. about 529,000 women die in childbirth each year. we have made a lot of progress, but we have a long way to go. i worry that the house 2011 budget proposes more than $1 billion in cuts to global health. what that means is 5 million children and family members will be denied treatment or prevention of malaria. more than 40,000 children under 5, of which 16,000 are newborns, will not get access to effective child survival interventions. pep far will have to turn away 400,000 people who rely on them

for treatment for hiv-aids. more than 40,000 children and family members will be denied treatment for tuberculosis. and we will have 18 million fewer polio vaccinations and 26.3 million fewer measles vaccinations. that affects us. i woke up this morning and was listening to the news and the effort that is being made to find some woman wandering around washington who is infected with measles. this will come back and affect our own health here at home. >> welcome. i want to comment first about the demonstration and change of government going on in the middle east and mediterranean. i am hopeful that -- not overly optimistic because of the long-

term history that they will readily adapt. the one thing that might be different is the use of the internet, and that is very positive. that is the first thing government closed down over there because the last thing they want is for information to get out. a lot of people in this country have come to the conclusion that our policy has been inconsistent. sometimes we support the bad guys and the bad guys become our enemies. for instance, we worked with osama bin lot and when he was fighting the soviets. -- osama bin ladin when he was fighting the soviets. we propped up the shah of iran for years which has engendered hate that we are now dealing with in iran. the list goes on and on. we have propped up saudi arabia

for a long time, sold them a lot of weapons, and yet 15 saudis were part of the 9/11 disaster. even and 9/11 commission said that our presence there had a lot to do with that. we keep supporting algeria, morocco, yemen, all of these dictators until it looks like a dictator might fall, and then we are all for democracy and freedom, and against these dictators. i do not think our people in this country quite understand it. he mentioned in your comments about libya that nothing should be taken off the table. to me, that is a little frightening, because the previous administration would use the phrase when asked about first rights and preemptive strikes. it scares the daylights out of me when nothing is taken off the table. when i read that we might be considering military activity

in libya -- i mean, we are flat gabbro. we art in all of these countries. -- flat out to broke. we are in all of these countries. we are expanding even though we do not have full control of iraq and only partial control of afghanistan. is there a limit to supporting dictators? i, of course, take a position that the least involvement is better, and deal with different people on different terms, rather than saying we will by a friend. i think that a friend bought is no friend. i think a friend the worst with military power breeds resentment. what about swearing off military aid for all dictators? think of what might happen in the middle east. if you did that -- i mean, here we supported egypt. do knows what kind of friends

they are going to be with israel? and why, wouldn't israel be a lot better off if we soar off all aid to all dictators in that -- swore off all aid to of dictators in that region as a moral position? >> you make a very passionate argument, and my response is that the united states, over the course of its entire diplomatic history, has had to make some very difficult decisions. we tried to balance what we believe to be in our interest. sometimes, i would argue most times, we get it right. sometimes we do not. take egypt, for example. i believe that it was in america's interest and in israel's interest to support its debt following in the camp david accord. 30 years of -- to support it

following the camp david accord. 30 years of peace between egypt and israel. the fact that we did have those relationships in egypt made it possible for us to have very frank conversations and prevent what we now see going on in libya. >> may i interrupt just a second to ask, is there no chance in the world that israel might not be better off under these conditions? it seems like they might be worse off because of what is happening over there, mainly because the dictators will have our weapons and they may well be turned against israel. >> i think the policy we have protect against that. i think the israel -- a think israel prefers predictability. a vacuum could lead to a very bad outcome for them.

>> the gentleman from new jersey is recognized for five minutes. >> madam secretary thank you for the service that you give this country. i have a couple of questions. the other day, defense secretary that imade a statement backin thought was very curious. he said that any secretary of defense who would recommend using ground forces should have his head examined. the wars have led to the deficit the we are carrying in this country. is that a recognition that we really should not go in with armies into some of these countries? we're just going to squander our

resources and not really get anywhere. >> i think what the secretary of defense was saying should be heeded. it is a very strong warning. i also believe that there are situations where we have no choice, but we need to be very clear that it is the only investor is available to us. >> i am concerned that we will get into a ground war with libya. my second question has to do with cuba. we seem to be making concessions. pleasing to be doing all of the things that the government of cuba -- we seem to be doing all of the things that the government of cuba once, but they are terrible human rights abusers. yet, we have appropriated $20 million towards human rights activities in cuba. but we have not spent a dime of

it. >> we are committed to spending that money. we are trying to do so in a way that will strengthen direct engagement with the cuban people. i know you are very aware not only of the terrible abuses by the castro government against cubans, but the holding of one of our usaid personnel, who is we remain committed to advancing policies that will assist cubans on the grounds. we are committed to freedom and democracy for the cuban people. >> i happen to have gone to columbia for the swearing-in of the new president. -- colombia for the swearing in of the new president. i thought it was weak in terms of crop presentation from the state department. there was a delegation of

congress people that when. but we did not see too many people from the state department. i see that the president is going to fly from brazil into well salvador. he is not stopping in colombia. yet we seem to basically do not do the right things. they have made remarkable changes in their country. as you talk to different people, i see the changes. >> thank you for going. the representation by the united states is only part of our engagement with columbia -- colombia. we have maintained close

relations with him and his government. we are very proud that the united states has been a partner for the colombian people now for a long time so that they can realize the benefits of the developments that you have attested to. we are strong supporter of the colombian and panamanian free trade agreement. i would like to see those pass this year. we are working very closely with the colombians and with the progress to make sure we can do that. >> thank you very much. >> the vice chair of the subcommittee is recognized. >> i want to thank the secretary of state for her testimony and her service to the country. also want to thank you specifically for the efforts by the administration and your office is to further isolate

libya during a time of extraordinary -- escalate libya during a time of extraordinary tragedy. i want to encourage people -- -- i want to continue to encourage the administration to stand with those who are standing. to use all means at our disposal to provide support. muammar gaddafi must go. i am grateful to hear the the administration take that position. i want to thank you for

mentioning president george w. in your opening. your comments are most welcome. in your testimony, on page five, you make reference to a 60% cuts forestage u.s. aid -- cut for a usaid. i am more associated with your statement on september 10, 2010. you were quoted as saying, are rising debt levels pose a national security threats. a couple of facts. you use the numbers 16% and i

will not question your arithmetic on that. we had a pretty long the debate over the continuing resolution. as we approached it down, the projects that were eliminated in the basic text include 300 million in a contribution of the clean technology fund, a 75 billion eliminated in the strategic climate fund, 55 million eliminated from the united nations population fund. 5.7 million eliminated from cultural preservation, global diversity trust to be $10 million hit. i see none of those as devastating to our national security. in terms of the reductions of programs, even after you factor in the programs that were eliminated, and those that were reduced, there still a rather

significant increase in spending and covers 2008 level. at a time when we are facing a $1.60 trillion deficit, the deficit contributed to buy at leadership of both political parties, we are facing a $14 trillion national debt that could double over the next 10 years. i find myself more associating with your sept. commons before the council on foreign relations then with the assertion that a 60% cut in may u.s. aid budget that has been greatly expanded in the last three years -- usaid budget that has been greatly expanded the last three years.

where do we cut? where do we began if we cannot do without programs like the clean technology funds, the fund for cultural preservation? if we cannot suffer a modest reduction that still leave us above the two dozen a levels -- 2008 levels, i would welcome your response to where we do begin to put our fiscal house in order. i was one of the members of this committee who helped engineer a couple of times the passage of the cut farm program. despite my cheerful conservative record, i believe the compassion of the american people is expressed in the manner in which we could allow it side nation's trade but we are in trouble here.

this country is going broke. we have to ask every department of this government and say, where can be saved? where is the right place to start? >> congressman, i appreciate your thoughtful question. i recognize the dilemma. my plea would beat that we looked hard at what we are doing that is part of national security. i would like to see what we are doing in the front line states, for example, treated in the same way the military overseas contingency operations are treated. what will happen is that the obligations that we face in iraq, afghanistan and pakistan,

is either going to save the game or lose the game of the next few years. >> thank you, madame secretary. i do apologize. >> welcome, madam secretary. i want to thank you for your passionate defense of american values as you travel across the globe. there were reports that iaea quarterly report indicating that iran is exploring ways to militarize the nuclear program. the report stated that iraq is trying to move advanced centrifuges that could reduce the amount of time needed to produce weapons and create fuel. iran is continuing to expand the production of nuclear fuel.

they now possess over 8,000 pounds of uranium. the president stated that iraq is development of a nuclear weapon is unacceptable and that -- iran's development of a nuclear weapon is unacceptable. i would ask if you could speak to the efforts of the administration in the state department in enforcing. >> thank you very much. we have put together, thanks to the work of this committee and others, a very effective sanctions regime, which we're constantly looking to improve, to strengthen. we welcome the advice from this committee particularly. when we passed, it was on top of

the iran sanction. last fall, i opposed sanctions for the first time on the swiss- based iranian it: a firm. it was a major investment -- investor in a number of oil and gas projects in iran. we took the advantage of what was in to begin its sanction on human rights. we have more designations in addition to what we have done coming. we have used it to convince to withdraw from iran and promised not to do any further business. we have worked with a number of our partners to see these kinds of developments. a number of shipping companies have discontinued service to

iran. major energy traders have discontinued the sale of refined projects to iran as a result of restrictions on gas exports. they have reduced their gasoline subsidies, increasing the price is 400% and 2000% for diesel fuel. that has all had an amplifying the effect on negative trends in the iranian mismanaged economy. we continue our international outreach and we have conformed firms that we're going to add additional sanctions. we have made progress with international support, but we have more that we need to do. >> along those same lines, china recently announced a $2.5 billion in new investment in

iran's oil production. dealingthe department' with this? >> we actually have worked closely with the chinese, but it is a never-ending efforts. they are hungry for energy. they do not see iran as a threat to them, so laughter much diplomatic effort and arm- twisting, they went along -- so after much diplomatic effort and arm-twisting, they went along with the sanctions. it is a constant determined effort for us to keep them abiding by the sanctions they agreed to. we were caught and every day. >> the office of terrorism finance and economic sanctions broadness oddest -- runs out staff of four people. would we be jeopardized and

international security if they do not have the appropriate funds? >> we have had such a terrific team both the treasury department and the state department. i was the first person who set up a designated sections operation inside a state department because we want all of these -- we went to all this trouble to pass sanctions and we did not follow through. >> thank you, madame secretary. >> you can watch this hearing in its entirety at c-span.org/ videolibrary. secretary clinton will be back on capitol hill tomorrow morning. live coverage begins at 9:30. federal reserve chairman ben

bernanke was on capitol hill today. he spoke about rising oil prices and the effect it could have on u.s. economic recovery. his testimony is next on c-span. after that, governor scott walker lays out his state's budget plan. today, the house agreed to a two-week extension for government funding. the debate is later. >> over a thousand middle and high school students entered the competition and. bg entered the competition in. c-span will announce the 75 winners on wednesday. we will stream all the winning videos. >> ben bernanke said the u.s. economy will continue to grow this year despite rising oil prices and high unemployment rates and a weak housing market. this hearing is two hours and 20 minutes.

>> i want to call this hearing to order. i want to thank ben bernanke for being here but german bernanke, -- for being here. you are a reminder of how far we have come in just a few short years. it is also the challenge is that our nation continues to face. i am pleased that our country continues to show positive signs of recovery.

and being able to strike the right balance of positive growth, low inflation, increased employment, and long-term deficit reduction. as chairman of the fed, you will strive to strike that balance. but not without some controversy. the fed has taken unprecedented steps to minimize the negative impact of the financial crisis and get us back on track. including a second round of quantitative easing. while some critics have been very vocal, going so far it to call for an end to the dual mandate, but i believe that you should be commended for your work. as the economy continues to struggle to recover, we should be using every tool in the toolbox to create jobs and spur

growth. taking tools away from the fed now is the wrong idea at the wrong time. there are many challenges ahead and the fed has an important role to play. american conception -- american perception continues to be depressed. businesses will be reluctant to expend -- to spend and increase output. it was encouraging to see the unemployment rate dropped to 9.0% in december. while subprime mortgages made up the initial wave, we are now seeing families facing foreclosures because of unemployment.

because of unemployment. event optimistic forecasters say it will take several years before the unemployment rate returns to precrisis levels. but it's going to require effective pauses to jump strt hiring and exexports. congress has taken steps to increase growth and provide needed certainty and protection in the financial system. there's certainly more we can do and must do ensure our economy is on solid ground and only can we turn our focus entirely to this deficit reduction. chairman bernanke, today, i'm very interested in hearing your analysis of our current economic

situation and what more congress and the fed can do to increase output, employment, and overall economic growth. i would also like to hear your thoughts on how we balance sustainable economic growth, amid calls to cut government spending and reduce the nation's deficit. as a nation, we face significant challenges, and i appreciate your cost on these challenges today. >> thank you. thank you chairman johnson. chairman bernanke, welcome, again, to the committee. over the past year, the fed's balance sheet has increased by $200 billion and now stands at over $2.5 trillion. over the next yea, the balance sheet is expected, mr. chairman. last november, the federal open

market, ofmo announced its departure from an additional 600 billion of treasuries by the middle of this year. the second round of so-called quantitative easing, commonly referred to as qe-2, means that the fed will be purchasing the equivalent of all debt in june. chairman bernanke has said that the qe-2 is necessary because of the high unemployment rate, low inflation rate and near zero federal funds rate. qe-2, however, has not been strongly embraced by all of the federal market committee. from the beginning, one fed bank president has voted against qe-2 because the purchase of additional securities could cause, he thinks, an increase in long-term innationary expectations. three other members of the ohmec

has sa it will lower inflation pleasure. and the fifth member has said we are pushing the envelope with the qe-2 purchase. in addition, several common economists have said it risks sparking inflation and it is not helpful in addressing our fundamental quick problem. these are serious questions, mr. chairman. after all, once price instability has been launched, as you well know, it's difficult and very costly to regain. i think we need to remember the soaring interest rates and high unemployment that followed chairman volcker's efforts in the early '80 to regain control over inflation. in light of the risk at that fed is taking with qe-2, i believe it is appropriate at that fed provide a more thorough explanation of what it hopes to

accomplish with qe-2. is it an effort to reduce unemployment by tolerating a higher flation rate? is the purpose to help the administration out of its physical problems by monetizing federal debt? is the purpose to inflate our way out of our housing problems, or is it something else? additionally, the fed has not yet clearly articulated the basis on which qe-2 should be judged. for example, if inflation rises to 3%, is qe-2 still deemed a success? if unemployment stays above 8%, is qe-2 a success? if the inflation falls to near zero, is qe-2 a success? these basic questions cannot be answered without clearer guidance from the federal reserve. today, mr. chairman, i hope that you explainhow the fed will determine if qe-2 is working and how the fed bieves qe-2 should

be evaluated. i hope to hear what indicators the fed will use to determine if the qe-2 needs to be scaled back or expanded. make no mistake, we all know the fed has hadto respond to the worst economy in a generation. unemployment stands at 9:00%. home prices continue to decline, and the federal deficit exceeds $1.3 trillion. monetary policy is always a difficult task, but our fragile economy and perilous fiscal decisions have preseed new challenges for the fed, as you know. however, i think the american taxpayer deserves to have clear measures by which it can easily evaluate fed policy, especially extraordinary actions like qe-2. without clear methods, the public cannot determine if qe-2 was a ccess. nor can it hold the fed

accountable for failure or success. thank you, mr. chairman. >> thank you, senator shel. i would ke to briefly introduce our witness, ben s. bernanke as chairman of the board of the federal reserve system, currently serving his second term, which began on february 1, 2010. prior to him becoming chairman, dr. bernanke was chairman of the president's council of economic advisers from 2005 to 2006. in addition serving the feral reserve system in a variety of roles, dr. bernanke was previously a professor of economics and public affair at princeton university. i want to thank you again for being here today. chairman bernanke, you may begin your testimony. >> thank you, mr. chairman.

chairman johnson, ranking member shelby and other members of the committee, i'm pleased to present the federal reser's semiannual monetary policy report to the congress. i'll begin with a discussion of economic conditions and the outlook before turning to monetary policy. following the stabilization of economic activity amid 2009, the u.s. economy is now in its seventh quarter of growth. last quarter, for the first time in the expansion, our nation's gdp matched its precrisis peak. job growth remains relively weak. economic recovery was largely attributesable to the stainlessization of the financial system the effects of financial, monetary d fiscal policies and strong boost to production for businesses rebuilding their depleted inventories. economic growth slowed significantly in the spring and early summer of 2010 as the impetusor buding of fiscal

stimulus diminished. more recently, however, we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. notably, real consumer spending has grown at a solid pace since last fall. and business investment in new equipment an software has continued to expand. stronger demand, both domestic and foreign, has supported steady gains in u.s. manufacturing output. the combination of rising household and business confidence, accommodative monetary policy and improving credit conditions seems likely to lead to a somewhat more rapid pace of economic recovery in 2011 than we saw last year. the most recent economic rejections that we saw by the bank presidents prepared in conjunction with the meeting in late january is for real gdp to

increase by 1.5%. and while indicators of spending and production has been encouraging on balance, the job market has improved only slowly. following the loss of about 8.75 million jobs from early 2008 to 2009, private sector employment expanded by a little only of 1 million with recent graduates to the labor force. we to see grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in december and janua. a op for new claims in unemployment insurance and an improvement in the firm's hiring plans. even so, if the rate of economic growth remains moderate as projected, ican be several years before the unemployment rate has returned to a more normal level.

indeed, still in the range of 7.5 to 8% in the end of 2012. until we see a stronger period of stronger job creation, we cannot consider recovery to be truly established. likewise, the housing sector remains exceptnally weak. the overlanguage of vacant and foreclosed houses is still weighing heavily on prices of new and existing homes. and sales and construction of new sing 8-family homes remain depressed. although mortgage rates are low and house crisis has reached affordable lenders, more he buye are finding mortgages difficult to maintain. inflation has declined on balance with the onset of financial crisis reflecting high-levels of resource slack and expectations. indeed, over the 12 months ending in january, prices for

goods and services are measured by personal expenditures increased only from 1.2% down from 2.5% in the earlier year period. wage growth has slowed as well with average hourly earnings increasing 1.9% in the year ending in january. in combination with product tiftd, slow wage growth has required very tight restraint on labor costs per unit of output. most project is that overall inflation will be $1.25 to 1.75% later this year. private sector forecasters generally also anticipate subdued inflation over the next few years. measures of immediate and long-term inflation derived from treasury bonds appear broadly consistent with these forecasts. survey of households project

that the expectations remain stable. although overall inflation is low, since summer, wee have seen significant increases in highly visible prices, including those of gasoline and other commodities. notably, in the past few weeks concerns about unrest in the middle east and north africa and the possible effects on global oil supplies have led oil and gasoline prices to rise further. more broadly the increases in commodity prices in recent moss have largely reflected growing demand for raw materials, particularly in fast-growing emergent economies, coupled with restraints in global supply. commodity prices have risen significantl suggests that changes in the foreign exchange valuing the dollar are likely to have been an important driver of the increases seen in recent months. the rate of pass-through from commodity price increases to broad indexes in the u.s. consumer prices has been quite

low in recent decades, partly reflecting the small weight of material inputs in total production costs, as well as the stability of longer-term expectations. higher commodity prices are also being offset by the instability in labor costs. thus, the most likely rise will lead to a temporary in price inflation. an outlook consistent in participation of f-1-c participate pavntss. that said, sustained rises in prices of oil or other commodities would recommend a threat both to economic threat. we will continue to monitor these developments slowly closely and are prepared to respond as necessary to best support the ongoing recovery in the context of price stability. as i noted earlier, the pace of recovery slowed last spring to a

rate that if sustained would have been insufficient to make meaningful progress against unemployment. with job creations falling, concerns about the sustainability as recovery increased. at the same time, inflation already at low levels continue to drift downward and market-based measures of inflation compensation moved lower as investors appear to become more concerned about the possibility of deflation or falling prices. under such conditions, the federal reserve would normally ease monetary policy by reducing the target for short-term policy interest ratto federal funds rate. however, the target range for federal funds rate would be near zero for 2008, and 9 federal government reserve has indiced that economic conditions are likely to warrant an exceptionally low target. consequently, another means has been necessary since that time. in particular, over the past few years, the federal reserve has

eased monetary conditions by purchasing longer term securities, agency debt, and agency-back securities on the open market. the largest program purchases which lasted december 2008 through march 2010 appears 0 to have contributed to an improvement in financial conditio and a strengthening of the recovery. notably, the substantial expansion of the program announced in march 2009 was followed by financial and economic stabilization and a significant pickup in growth in economic activity in the second half of that year. in august 2010, in response to the already mentioned concerns about the sustainability of the recovery, the continuing declines in inflation to vur low levels, the f1-c authorized the policy ever payments into longer term treasury securities. by reinvesting agency securities, rather than allowing them to run off as previously dictated, it assured that

high-level accommodation would be maintained over subsequent weeks, federal reserve officials noted in public remarks that we were considering providing additional monetary accommodation through further asset purchases. in november, the committee announced it intended to purchase an additional $600 billion in longer-term treasure securities by the middle of this year. largscale purchases of longer-term securities are a less means of providing monetary stimulus than reducing the rate. but the two affect the economy in similar ways. conventional monetary policy sing works by lowering expectations for the future path of short-term interest rate which is in turn reduces the level of longer-term interest rates. this easing of financial condition bolsters household and business spending and thus increases chick activity.

by comparison, the federal reserve's participation put down pressure on longer term interest rates by sing credit and financial markets these actions encourage spending by households and businesses by is he-e essentially the same channels as conventional monetary policy. a wide range of market indicators supports the view that the federal reserve's recent actions have been effective. for example, since august when we announced our policy of reinvesting principal payments, equity prices have risen significantly. voluntarily in the equity market has fallen, corpore bonds has narrowed and inflation as measured in securities has risen to historically more normal levels yields on five to ten-year phenomenal treasury initially declined marketedly. these yields subsequently rose, however, as iestors became

more optimistic about economic growth and as traders scaled back their expectations of futures securities purchases. all of these developments are what one would expect to see when monetary policy becoming more accommodative whether through conventional or less conventional means. interestingly, these market responses are almost identical to those that occurred during the earlier episode of policy easing. in addition, as i already noted, most forecasters see the economic outlook as having improved since the actions in august. downside risk to recovery have recedeand the risk of deflation has become negligible. at of course, it's too soon to see how much can be tributed to economic policy, but consistent with having had a beneficial effect. my colleagues and i continue to regularly review the asset purchase program in light of incoming information. and we will adjust it as needed

to promote the achievement of our mandate from the congress of maximum employment and stable crisis. we also intend to plan from the eventual exit from monetary policies and the normalization of the federal reserve's balance sheet. we have all the tools we need to achieve a smooth and effective exit at the appropriate time. currently because the federal reserve's asset purchases have settled through the banking system, dmros tore institutions hold a high level with the federal reserve. even as bank reserves remain high, our ability to pay interest on reserve balances will allow us to put upward pressure on short-term interest rates and thus to tighten monetary policy where required. moreover, we have developed and tested additional tools that will alou us to drain or immobilize bank reserves to the extent needed to tighten the relationship of rates. if necessary, the federal reserve can also drain reserves by ceasing the reinvestment of

principal payments on the secures it holds by selling some of these securities on the open market. the f-1c remains unwaving under that control. and consistent with the federal reserve's mandate. the congress established the federal reserve and set as monetary policy objectives and provided it with operational independence to pursue those objectives. it's critical as it allows the f1-c to make conditions based slowly on the economy. considerable evidence supports the view that countries with independent central banks enjoy better economic performance over time. however in our democratic society, the federal reserve's independence brings with it an obligation to be accountable and transparent. the congress and the public must have all the information needed to uerstandur decisions, to be assured of e integrity of the our operations. and to be cough accident that

our actions are consistent wi the mandate given to us by the congress. on matters related to conduct of the monetary policy, the federal reserve is one of the most transparent central banks in the world, making available extension suffer records and materials to explain its policy decisions. for example, beyond the semiannual monetary report that i'm providing today, the f1-c provides meetings, quarters with a narrative and a five-year lag, a transcript of each meeting and supporting materials. in addition, participants also discuss the economy and monetary policy in public fums and board members testify frequently before the congress. in recent year, the federal reserve has substantially increased the information it provides about its operations and its balance sheet. in particular, for some time, the federal reserve has voluntarily been providing operational and functional information regarding the

special credit liquidity put in place, including the full-terms of each facility, monthly reports, and the collateral posted. weekly updates about borrowings and payments about each facility and many other details. first, on november 1st, as provided by the dodd-frank act, the federal reserveosted 21,000 individual and other credit transactions adopted to stabilize and support the economic recovery. this transaction demonstrate the breadth of these operationsnd the care that bass taken to protect the taxpayer. indeed, despite the scope of these actions, the federal reserve has adopted no credit losses in any programs and no credit losses in the few programs that have loans outtang. moreover, we're fully confident that independent assessment of these programs will show they

were highly effective in helping to stabilize the markets. indeed, the operational effectiveness as recely supported is part of the comprehensive review of six lending facilities by the board's independent officer inspector general. in addition, we've been working closely with the gao, theffice of the sig-t.a.r.p., the congressional oversight panel, congress and auditors, as well as a range of matters relating to the federal reser's operations and governance. we will continue to seek ways of enhancin our transparency without compromisingur ability to conduct policy in the piubli interest. thank you for yo attention. i'd be pleased to take your questions. >> thank you, mr. chairman. i will remind my colleagues that we will keep the record open for seven days for statements, questions and any other material you would like to submit.

and i will ask the cler to put five minutes on the clock for each member's questions. i will not cut you off midsentence, bud i'd appreciate if you would begin winding down with the clock. mr. chairman, has the bipartisan tax cuts enacted last december been a boost to economic growth? and to what extent does it complement the fed's qe-2 program short term? >> yes, mr. chairman, everything else equal, at additional tax cuts, includinged payroll tax cut and the business expensing provisions should add to aggregate demand and contribute somewhat to growth in 2011. and in 2012. i should say, in that respect,

it's complementary to the fed's monetary policy actions. i should say in our projections and forecasts, we try to make an assessment of what we think is most likely in terms of fiscal policy. and we had anticipated, as of november, for example, that many of these provisions, including the ui and most of the tax cuts would be extended. and so we had taken that into account in our analysis. that being said, there was some additional stimulus coming from the payroll tax cut, for example, which we had not anticipated when we were looking at our forecast in november. >> what do you see as the impact on rising gasoline crisis? >> well, this is something we have to pay very close attention to because it affects both sides of our mandate. on the one side, obviously, directly affects the inflation rate. and to the extent it raises inflation expectations or reduces confidence in the

public, in the maintenance of low inflation, it can be an inflation ris at the same time, higher gas prices take income out of the pockets of consumers, reduces their spending and their confidence. and so it can also be a problem for recovery. so we have to look at it from both perspectives. my sense is that the increases that we' seen so far will obviously be a problem for a lot of people, do not yet pose a significant risk either to the recovery or to the maintenance of overall stable inflation. however, we'll just have to continue to watch, as we see any significant additional increases, we'll obviously have to take that very seriously. >> what is your perspective on how we can promote long-term growthin light of the need to reduce the size of the deficit? are there particular policies or

government investments that will promote u.s. economic growth and our international commitment over the long term even as we work to reduce spending overall? >> mr. chairman, i spoke about this a bit in the testimony before the senate budget committee. the fiscal situation is very challenging, so on the one hand, it's clearly important, and indeed, a positive thing for growth to achieve a long-term fiscal sustainability that will help keep interest rates down that will increase confidence and would mean that future taxes would be and that would be beneficial to growth. at the same time, to the extent possible, i hope that congress will not just lo at the inflow and outgo, but will also think about the composition of spending and the structure of the tax code. on the tax side, i think there's a good bit that can be done to make the tax code more efficient

and more fair and less difficult to comply with. on the spending side, i think attention should be paid to important areasike research and development, education, infrastructure, and other things that help the economy grow and provide a framework through -- you know, that allows the private sector to bring the econy forward. it's a double challenge, on the one hand, the need to control spending, on the other hand, not to lose sight of making sure importance of making sure the money spent is spent effectively and with attention to long-term growth. senator shelton. >> thank you. >> thank you, mr. chairman. chairman bernke how did the federal reserve initially determine that $600 billion was the appropriate amount for qe-2 and that eight months was the appropriate time frame? >> well, first, senator, i want to emphasize that last august or

so when we were looking at this possibility, we were quite concerned about where the economy was. inflation was declining and inflation risk was rising. and growth had slowed to the point where we were unsure that employment would continue to rise. we felt we needed to take some action. in terms of the $600 billion, we tried through a number of methods to establish a correspondence between these purcses and what our normal interest rate policies would be. a rule of thumb is $150 billion $200 billion in purchases seems to be roughly appropriate to a cut in federal rates in terms to the economy. $600 billion is roughly a 75 basis cut in the policy rate, in terms of its broad impact.

75 basis points in normal times could be considered a strong statement, a powerful move, but not one outside of the range of historical experience. it would be one that would be taken at a period of concern. and then we would observe the effects. so that was roughly the analysis that we did >> in your testimony, you state, and i'll quote you teoday, the federal reserves independent brings with it the obligation, via transparent. as i mentioned a statement here, i believe there has to be a clear basis in judging if qe-2 is a success or failure. what specific metrics should the public use, in other words, what basis should we judge the success or failure of qe-2? >> i thank you for your question. it's a very fair question.

the question of whether or not it actually works, whether it has effects. some will claim that it doesn't. as i talkedbout in my testimony, as we look at financial markets which is the way all monetary policy is transmitted to the real side of the economy, the movement of a wide variety of financial crisis andeturns are quite consistent with wha you would expect to see with that 75 basis-point cut in interest rates. i mentioned the stock market spreads, inflation expectations, interest rates and the like. so our assessment of the effects of the policy are that it is providing stimulus through the usual mechanisms that monetary policy works. and we can use our metric tools to judge how important, how powerful that stimulus is. now, for the public, of course, what they want to see is results. and i would argue that we have basically two objectives. corresponding to the two sides of our mandate.

the first is to stabilize inflation at a long-run normal rate which is about 2% which is consistent with international standards of where inflation should be to appropriately trade off the benefits of low inflation again the risks of being too close to a deflationary zone. and we are clearly moving towards that risk and clearly, deflation is declined. on the other side, it's hard to be quantitatively consistent. but the see is, instead of unemployment stagnating or going up, that we see a sustainable recovery moving forward. over the next few moss, we'll be able to make a judgment as to whether the economy has the ability to make a move on its own. and therefore, the additional support for policy can be withdrawn. every out past few years, the

total debt spending increased by $1.7 trillion to advance the spending policy of the administration. over that same time period, the fed increased its holdings of u.s. treasury securities by $337 trillion. the fed alone is responsible for financing almost 20% of the massive increase in government spending. how has the lack, mr. chairman, of fiscal discipline, complicated the fed's conduct in monetary policy? and when the fed ends its large-scale purchases of treasury debt, what impact will it have on the ability of the treasury to finance that debt? >> well, the intent of the program first was to hold down interest rates, relative to where they otherwise would be. >> has that worked >> that seems to be working, yes. >> a lot of people dispute that.

but go ahead. >> well, as i noteded in my testimony, interest rates have gone up. the same thing happened in 2009 after our previous policy because interest rates depend on future expectation of growth, as well as on policy actions. with that being said, we certainly want to be sure to remove that stimulus the at the appropriate time. so at least as concerned a you, senator, about inflation, we want to make sure we don't have an inflationary effect. so we must remove that at the appropriate time. we learned that in the first quarter of last year, when we ended our previous program, that the markets had anticipated that adequately. and we didn't see any change in interest rates. i don't expect that we'll see a big impact. i think it's the total ability of holings, rather than the flow that affects the interest rates.

all that being said, you asked whether the fiscal policy was a prlem. i think the long-term unsustainability of our debt is a significant problem because it threatens higher interest rates, less confidence, and it could have impact on t current recovery. and so i have been urging congress to address these problems, not just in the current fiscal year. but looking over a longer time frame because it is, in fact, over the next 10 or 20 years, that these problems are going to be extraordinarily pressing. >> senatis that the number one problem, as you see, is our unsustained -- i mean, our continued spending and our accumulation of the debt? >> yes, i would say it is. >> number one economic problem facing this country? >> over the longer term, certainly. certainly something to be addressed to get us back on the sustainable path.

that can't be done over the next week. we need to look over the next five, ten, 15 years how we're going to get on a sustainable path. >> thank you. >> senator reed. >> thank you very much, mr. chairman. i assume you're familiar with two recent reports by moody's analytics and goldman sachs which talked about the proposed use republican budget. their conclusion is it passed without modification. there could be as much as a 2% decrease in the growth next year, going forward. as many as 700,000 jobs lost because. contraction of spending at the federal lel. do you agree with those -- that analysis? >> if that's referring to a $60 billion cut, obviously, that would be contractionary to some extent our analysis doesn't give a number that high. >> well, the close cut this year

is $100 billion in the house. is that you what used for your job s report? >> we're assuming 60 this year, and 100 next year. we also have the spend-out, the impact is spent out over time. the reduction is effective over time. and we get -- i have to say -- a smaller impact of that. >> what is your impact? >> several tenths or gdp. >> and jobs? >> i don't have that number, but certainly much less than 700,000. >> and i just want to say, what the assumed cut would be in this year, some of the things we've heard in the house proposal, it's a $100 billion cut for this year. >> this year. >> which would be $40 billion larger than you would estimate -- that you're using as a parameter? >> well, then i would multiply

it, you know, by -- you know, two-thirds greater. but i sill don't -- i'm happy to send you our analysis, senator. i frankly don't understand -- 2% is an enoous -- 2% of the gdp is $300 billion right there. so assuming a multiplier of 1, you know, 60 to $100 billion, it's not sufficient to get to that level. but it would, of course, have the effect of reducing growth on the margin, certainly. >> it would have the effect of reducing growth which would -- again, the question is how much, which would be contradicting or at least to your stimulus effect, qe-2? >> that's right. that's why i tried to emphasize. i know tha congress will be looking at this, the needto think about the budget issue,

not as a current year issue. because obviously, whatever can done, 60 billion is not goin to have much impact on the long-run imbalances in our economy, in the fiscal policy. i think it's much more effective, both in terms of short-term effects on the economy, but also in terms of longer-term sustainability and confidence to address the budget deficits over at least a five to ten-year window. >> the issue that confronts us is this year's budget and next year's budgets, that's the issue du jour, literally? >> right. >> again, my presumption tha last quarter gdp was originally estimated at 3.2%, downgraded to 2.8%. is that your rough understanding, too. >> that's the what the bureau of economic analysis said, yes. >> and their conclusion was that a lot of that was the result of spending at the state and local

governments? >> that's right. >> i'm just wondering if we contract at the federal level which has a ripple effect at the local level very quickly because many of the programs that we support are really run by, relegated to and staffed by people and local employees. you don't understand a fall-off, a deliberate fall-off in growth? >> it would have a negative impact. but, again, i think the 2% -- i'd like to see their alysis. it just seems like somewhat a big number, relative to the size of the cut. and, again, for the record, you're assuming this year's budget, a reduction of $60 billion from the president's proposal? >> yes. that's right. >> that's right? >> uh-huh. >> and we've heard from the republican side of the house, $100 billion. there's $40 billion which you have not factored into your